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Union: Caution On Countrywide Buyout

WISCONSINREPORT.COM (01/11/08) - The fastest-growing union is calling the combination of the United States largest mortgage lender with the largest bank when both institutions are facing mounting losses and potentially destabilizing risks bad for consumers, bad for business, and bad for America. The Service Employees International Union (SEIU) is cautioning against uncritical and short-sighted support for Bank of America's attempt to acquire troubled mortgage giant Countrywide Financial Corporation. An official statement from the union suggests this may not be the way to save Countrywide from bankruptcy.

"With the deepening housing crisis and growing concerns about the unknown risks lurking on and off Bank of America's balance sheet, we believe combining the largest bank with the largest mortgage lender will result in unnecessary and unacceptable long-term risk to the nation's working families and consumers," the Service Employees International Union statement says.

The union position is that permitting such concentration of risk would be like putting a sick patient, Bank of America, together in the same room with a highly contagious and terminally-ill patient, Countrywide, and expecting both of them to get better.

"While investors and regulators are eager to see Countrywide avoid bankruptcy, it is more critical than ever that lawmakers take measures to curb the growth of the nation's biggest banks," the SEIU statement continues.

The union suggests that huge banks and mortgage lenders have long leveraged their market dominance to rake in huge profits regardless of the risks to consumers and the economy and any bailout of Countrywide would be misguided, according to the statement.

"Rather than uncritically cheering Bank of America as a potential savior in the short-term, lawmakers and regulators must look to the potential long-term harm to working families and consumers and the risks to the economy of a Bank of America-Countrywide combination," the SEIU statement continues.

"In addition to being the largest bank in terms of branches and deposits, Bank of America already holds a dominant position in credit cards and other areas and has been growing its own mortgage lending business. Further consolidation of the nation's banking industry would inevitably result in concentrated economic risks," according to the union position on the matter.

The SEIU believes that "lawmakers must aggressively enforce the 10 percent cap on bank deposits and set standards for the independent and transparent calculation of bank deposits and compliance. Bank of America should not be permitted to use a 'thrift institution' loophole to sidestep the spirit, if not the letter, of the 10 percent cap," the union statement says.

"The trade-off for working families and consumers could not be clearer," the statement continued.

"While a Bank of America bailout of Countrywide could help some mortgage holders today, the long-run harm in terms of reduced competition, higher fees, and even more hidden influence in legislative and regulatory circles is just too high a price to pay for the nation's working families," according to the official position of the 1.9 million member Service Employees International Union.